In 2018, a group of the world’s largest crude oil and natural gas producers added more hydrocarbons to their resource base than in any year since at least 2009, according to the annual reports of 116 exploration and production (E&P) companies. During 2018, these companies collectively added a net 10.3 billion barrels of oil equivalent (BOE) to their proved reserves, which totaled 286 billion BOE at the end of the year. Total exploration and development (E&D) costs incurred in 2018 for these companies increased 4% from 2017 levels, but declined 9% from 2017 when calculated as dollars per BOE of proved reserves added. This analysis is based on published financial reports of these 116 companies and does not necessarily represent the financial situation of private companies that do not publish financial reports.
Of the 116 companies, the top 18 held more than 80% of the 286 billion BOE in proved reserves at the end of 2018. Although many of these companies have global operations, some are national oil companies with reserves and operations concentrated in their home countries including Russia, China, and Brazil. Proved reserves change from year to year because of revisions to existing reserves, extensions and discoveries of new resources, purchases and sales of proved reserves, and production. Figure 1 illustrates the 116 companies’ combined proved reserves changes during 2018.
Organic additions to proved reserves—those added through improved recoveryand extensions and discoveries—are linked directly with expenditures in E&D. Proved reserves acquired through purchases and sales represent transfers of assets between companies (including companies outside this group) but are not reflected in E&D expenditures. Revisions to proved reserves can be highly influenced by changes in crude oil and natural gas prices but less directly influenced by E&D investment.
Of the 21.0 billion BOE in organic proved reserves added in 2018 (that is, before accounting for revisions, net reserves purchased, or how much the companies produced), slightly more than half (10.7 billion BOE) came from the United States, while the Russia, Central Asia, and Asia-Pacific region accounted for 4.0 billion BOE (19%). Canada added 2.1 billion BOE (10%) and Latin America added 1.6 billion BOE (8%). Europe and the Middle East and Africa region each added fewer than 1.0 billion BOE, accounting for about 4% of global organic proved reserves additions each (Figure 2).
Global E&D costs incurred increased for the second consecutive year in 2018, increasing 4% to $319 billion. Of this total, 38% ($122 billion) came from the United States, with the Russia, Central Asia, and Asia Pacific region accounting for 26% ($83 billion) and all other regions accounting for less than 10% each. Changes in nominal year-over-year E&D costs incurred varied across regions, increasing by 33% in Europe, 13% in the United States, and 3% in the Middle East and Africa region. Costs incurred declined by 2% both in the Russia, Central Asia, and Asia Pacific region and Latin America, while spending in Canada was essentially flat compared with 2017 (Figure 3).
Because significant cost deflation has occurred in the oil and natural gas industry since 2014, nominal costs incurred in different years may not be directly comparable. Finding costs provide an indicator of the expenditures needed to add a barrel of proved reserves. Because of the disparity between the timing of companies’ capital expenditures and the formal reporting of changes to their proved reserves, standard practice is to average the results over several years.
Analyzed this way, three-year average costs declined on a per BOE basis in 2016–18 compared with both the 2013–15 and the 2010–12 averages (Figure 4). The three-year average E&D costs incurred per BOE of organic proved reserves additions in 2016–18 were lower than their respective 2013–15 and 2010–12 averages in all regions except Latin America, where the 2016–18 average was slightly higher than its 2010–12 average. On an annual basis, the 2018 E&D costs incurred of $15.20 per additional BOE of proved reserves was the lowest since at least 2009.
For further analysis and a list of the companies included in this study, see EIA’s annual Financial Review. Later this year, EIA will issue its annual U.S. crude oil and natural gas proved reserves report which focuses exclusively on proved reserves located in the United States, including all U.S. producers (publicly traded and privately owned companies).
U.S. average regular gasoline and diesel prices decrease
The U.S. average regular gasoline retail price fell 3 cents from the previous week to $2.82 per gallon on May 27, down 14 cents from the same time last year. The Gulf Coast price fell over 4 cents to $2.47 per gallon, the West Coast price fell nearly 4 cents to $3.63 per gallon, the Midwest price fell 3 cents to $2.71 per gallon, the East Coast price fell nearly 3 cents to $2.70 per gallon, and the Rocky Mountain price fell less than one cent, remaining at $2.98 per gallon.
The U.S. average diesel fuel price fell more than 1 cent to $3.15 per gallon on May 27, 14 cents lower than a year ago. The price in each region fell over one cent. The West Coast price fell to $3.78 per gallon, the Rocky Mountain price fell to $3.18 per gallon, the East Coast price fell to $3.16 per gallon, the Midwest price fell to $3.04 per gallon, and the Gulf Coast price fell to $2.89 per gallon.
Propane/propylene inventories decline slightly
U.S. propane/propylene stocks decreased by 0.1 million barrels last week to 65.8 million barrels as of May 24, 2019, 9.8 million barrels (17.5%) greater than the five-year (2014-2018) average inventory levels for this same time of year. Gulf Coast and East Coast inventories decreased by 0.7 million barrels and 0.5 million barrels, respectively. Midwest and Rocky Mountain/West Coast inventories increased by 0.9 million barrels and 0.3 million barrels, respectively. Propylene non-fuel-use inventories represented 8.0% of total propane/propylene inventories.
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The 9th edition of the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) Awards, hosted by the Abu Dhabi National Oil Company (ADNOC), is now open for submissions.
In this fourth industrial age it is technology, innovation, environmental leadership and talented workforces that are shaping the companies of the future.
Oil and gas is set to play a pivotal role in driving technology forward, and at this year’s ADIPEC Awards emphasis is placed on digitalisation, research, transformation, diversity, youth and social contribution, paving the way towards a brighter tomorrow for our industry.
Hosting the ADIPEC Awards is one of the world’s leading energy producers, ADNOC, a company exploring new, agile and flexible ways to build its people, technology, environmental leadership and partnerships, while enhancing the role of the United Arab Emirates as a global energy provider.
Factors which will have a prominent influence on the eventual decisions of the distinguished panel of jury members include industry impact, sustainability, innovation and value creation. Jury members have been carefully selected according to their expertise and knowledge, and include senior representatives from Baker Hughes, a GE Company, BP UAE, CEPSA Middle East, ENI Spa, Mubadala Petroleum, Shell, Total and Weatherford.
Chairperson of the awards is Fatema Al Nuaimi, Acting CEO of ADNOC LNG, who says: “At a time when the industry is looking towards an extremely exciting future and preparing for Oil &Gas 4.0, the awards will recognise excellence across all its sectors and reward those who are paving the way towards a successful and sustainable future.”
Ms Al Nuaimi, continues: “we call upon our partners across the globe to submit their achievements in projects and partnerships which are at the helm of technical and digital breakthroughs, as well as to nominate the next generation of oil and gas technical professionals, who will spearhead the ongoing transformation of the industry.
These awards are recognising the successes of those companies and individuals who are responding in the most innovative and creative manner to the global economic and technological trends. Their contribution is pivotal to the development of our industry and to addressing the continuous growth of the global energy demand. “
Christopher Hudson, President of the Energy Division, dmg events, organisers of ADIPEC, says: “With ADNOC as the host and ADIPEC as the platform for the programme, the awards are at the heart of the worldwide oil and gas community. With its audience of government ministers, international and national oil companies, CEOs and other top global industry influencers, the ADIPEC Awards provide the global oil and gas community the perfect opportunity to engage, inspire and influence the workforce of the future.”
Entries can be submitted until Monday 29th July for the following categories:
Breakthrough Technological Project of the Year
Breakthrough Research of the Year
Digital Transformation Project of the Year
Social Contribution and Local Content Project of the Year
Oil and Gas Inclusion and Diversity Company of the Year
Young ADIPEC Technical Professional of the Year
A shortlist of entries will be announced in October and winners will be revealed on the first day of ADIPEC 2019, Monday 11th November, St. Regis Saadiyat Island, Abu Dhabi.
Held under the patronage of the President of the United Arab Emirates, His Highness Sheikh Khalifa Bin Zayed Al Nahyan, and organised by the Global Energy Division of dmg events, the Abu Dhabi Petroleum International Petroleum Exhibition and Conference (ADIPEC) is the global meeting point for oil and gas professionals. Standing as one of the world’s leading oil and gas events. ADIPEC is a knowledge-sharing platform that enables industry experts to exchange ideas and information that shape the future of the energy sector. The 22nd edition of ADIPEC will take place from 11th-14th November 2019, at the Abu Dhabi National Exhibition Centre (ADNEC). ADIPEC 2019 will be hosted by the Abu Dhabi National Oil Company (ADNOC) and supported by the UAE Ministry of Energy & Industry, Department of Transport in Abu Dhabi, the Abu Dhabi Chamber of Commerce and Industry, Masdar, the Abu Dhabi Future Energy Company, Department of Culture and Tourism - Abu Dhabi, the Abu Dhabi Department of Education and Knowledge (ADEK). dmg events is committed to helping the growing international energy community.
Source: U.S. Energy Information Administration, based on World Input-Output Database
Note: Dollar values are expressed in 2010 U.S. dollars, converted based on purchasing power parity.
The industrial sector of the worldwide economy consumed more than half (55%) of all delivered energy in 2018, according to the International Energy Agency. Within the industrial sector, the chemicals industry is one of the largest energy users, accounting for 12% of global industrial energy use. Energy—whether purchased or produced onsite at plants—is very important to the chemicals industry, and it links the chemical industry to many parts of the energy supply chain including utilities, mines, and other energy product manufacturers.
The chemicals industry is often divided into two major categories: basic chemicals and other chemicals. Basic chemicals are chemicals that are the essential building blocks for other products. These include raw material gases, pigments, fertilizers, plastics, and rubber. Basic chemicals are sometimes called bulk chemicals or commodity chemicals because they are produced in large amounts and have relatively low prices. Other chemicals—sometimes called fine or specialty chemicals—require less energy to produce and sell for much higher prices. The category of other chemicals includes medicines, soaps, and paints.
The chemicals industry uses energy products such as natural gas for both heat and feedstock. Basic chemicals are often made in large factories that use a variety of energy sources to produce heat, much of which is for steam, and for equipment, such as pumps. The largest feedstock use is for producing petrochemicals, which can use oil-based or natural-gas-based feedstocks.
In terms of value, households are the largest users of chemicals because they use higher value chemicals, which are often chemicals that help to improve standards of living, such as medicines or sanitation products. Chemicals are also often intermediate goods—materials used in the production of other products, such as rubber and plastic products manufacturing, agricultural production, construction, and textiles and apparel making.
Source: U.S. Energy Information Administration, WEPS+, August 2018
Note: Dollar values are expressed in 2010 U.S. dollars, converted based on purchasing power parity.
The energy intensity of the basic chemicals industry, or energy consumed per unit of output, is relatively high compared with other industries. However, the energy intensity of the basic chemicals industry varies widely by region, largely based on the chemicals a region produces. According to EIA’s International Energy Outlook 2018, Russia had the most energy-intensive basic chemicals industry in 2015, with an average energy intensity of approximately 98,000 British thermal units (Btu) per dollar, followed by Canada with an average intensity of 68,000 Btu/dollar.
The Russian and Canadian basic chemicals industries are led by fertilizers and petrochemicals. Petrochemicals and fertilizers are the most energy intensive basic chemicals, all of which rely on energy for breaking chemical bonds and affecting the recombination of molecules to create the intended chemical output. These countries produce these specific basic chemicals in part because they also produce the natural resources needed as inputs, such as potash, oil, and natural gas.
By comparison, the energy intensity of the U.S. basic chemical industry in 2015 was much lower, at 22,000 Btu/dollar, because the industry in the United States has a more diverse production mix of other basic chemicals, such as gases and synthetic fibers. However, EIA expects that increasing petrochemical development in the United States will increase the energy intensity of the U.S. basic chemicals industry.
The United States exports chemicals worldwide, with the largest flows to Mexico, Canada, and China. According to the World Input-Output Database, U.S. exports of all chemicals in 2014 were valued at $118 billion—about 6% of total U.S. exports—the highest level in decades.
The threat of military action in the Middle East has gotten more intense this week. After several attacks on tankers that could be plausibly denied, Iran has made its first direct attack on a US asset, shooting down an unmanned US drone. The Americans say the drone was in international waters, while Iran claims that it had entered Iranian air space. Reports emerging out of the White House state the US President Donald Trump had authorised a military strike in response, but pulled back at the last minute. The simmering tensions between the two countries are now reaching boiling point, with Iran declaring that it is ‘ready for war’.
Predictably, crude oil prices spiked on the news. Brent and WTI prices rose by almost US$4/b over worries that a full-blown war will threaten global supplies. That this is happening just ahead of the OPEC meeting in Vienna – which was delayed by a week over internal squabbling over dates – places a lot of volatile cards on the table. Far more than more than surging US production, this stand-off will colour the direction of the crude market for the rest of 2019.
It started with an economic war, as the Trump administration placed increasingly tight sanctions on Iran. Financial sanctions came first, then sanctions on crude oil exports from Iran. But the situation was diffused when the US introduced waivers for 8 major importers of Iranian crude in November 2018, calming the markets. Even when the waivers were not renewed in April, the oil markets were still relatively calm, banking on the fact that Iran’s fellow OPEC countries would step in to the fill the gap. Most of Iran’s main clients – like South Korea, Japan and China – had already begun winding down their purchases in March, reportedly causing Iran’s crude exports to fall from 2 mmb/d to 400 kb/d. And just recently, the US also begun targeting Iranian petrochemical exports. Between a rock and a hard place, Iran looks seems forced to make good on its threats to go to war in the strategic Straits of Hormuz.
As the waivers ended, four tankers were attacked off the coast of Fujairah in the UAE in May. The immediate assumption was that these attacks were backed by Iran. Then, just a week ago, another two tankers were attacked, with the Americans showing video evidence reportedly show Iranian agents removing mines. But still, there was no direct connection to Iran for the attacks, even as the US and Iran traded diplomatic barbs. But the downing of the drone is unequivocally the work of the Iranian military. With President Donald Trump reportedly ‘bored’ of attempting regime change in Venezuela and his ultra-hawkish staff Mike Pompeo and John Bolton in the driver’s seat, military confrontation now seems inevitable.
This, predictably, has the oil world very nervous. Not just because the extension of the current OPEC+ deal could be scuppered, but because war will impact more than just Iranian oil. The safety of the Straits of Hormuz is in jeopardy, a key node in global oil supply through which almost 20 mmb/d of oil from Iraq, Saudi Arabia, Kuwait and the UAE flows along with LNG exports from the current world’s largest producer, Qatar. At its narrowest, the chokepoint in the Straits is just 50km from Iranian land. Crude exports could be routed south to Red Sea and the Gulf of Aden, but there is risk there too; the mouth of the Red Sea is where Iranian-backed Yemeni rebels are active, who have already started attacking Saudi land facilities.
This will add a considerable war risk premium to global crude prices, just as it did during the 1990 Gulf War and the 2003 invasion of Iraq. But more than just prices, the destabilising effects of a war could consume more than just the price of a barrel. If things are heading the way the current war-like signs are heading, then the oil world is in for a very major change very soon.
Historical crude price responses to wars in the Middle East